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Former St. Louis Fed president and Purdue University's Dr. Samuel R. Allen Dean of the Mitch Daniels School of Business, Jim Bullard, joins Catalysts to analyze the Federal Reserve's latest interest rate decision and the market's sharp reaction.
"I don't think markets should have been quite as surprised as they were," Bullard states. He explains that Wednesday's 25 basis point cut achieves an appropriate policy rate level, given sticky inflation that will likely slow the pace of cuts in 2025. However, he acknowledges that the suggestion of a pause in the next few meetings "jolted markets."
Addressing neutral rates, Bullard emphasizes the need to maintain restrictive policy: "You still want to be restrictive, you still want to be putting downward pressure on inflation." He suggests 4%–4.25% as the appropriate policy rate range, noting that the committee is "right in the range of where they should be for this environment."
Bullard characterizes the Fed's decision and projections as "pretty good for the future," suggesting the market sell-off stems from participants "misinterpreting" the Fed's message.
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This post was written by Angel Smith